A few weeks ago, Jared Bernstein, the chair of the White House Council of Economic Advisers, gave a speech in Washington about what he termed the “almost round trip” of inflation, which went from 1.7 per cent in February, 2021, just after Joe Biden took office, up to 9.1 per cent in June of 2022, and back down to 2.9 per cent last month. Bernstein emphasized that the inflationary spike was primarily attributable to disruptions in the global supply chain, caused by the COVID pandemic. He argued, convincingly, that the Biden Administration’s policies helped the United States to weather that storm more effectively than many other advanced economies did. But he also acknowledged that the sharp jump in consumer prices had an unsettling effect on Americans. He noted that people tend to carry around in their heads a picture of what prices should be, and that when actual prices get out of whack with this picture, as was the case in 2021 and 2022, it can take a long time for them to mentally adjust, even if their wages eventually catch up. “In my job, vibes matter,” the White House economist said.
Bernstein’s boss would surely say the same thing. When the President addresses the Democratic National Convention in Chicago tonight, he will get a rousing reception, but, according to the RealClearPolitics poll average, his approval rating on handling the economy is still languishing below forty per cent. In an Economist/YouGov survey that was carried out last week, fifty-one per cent of respondents said the economy was getting worse, compared with forty per cent who said it was about the same or getting better. Meanwhile, the Labor Department announced that inflation was at its lowest rate in more than three years, the Commerce Department said that retail sales grew more than expected last month, and the stock market continued to rebound from its tumble a couple of weeks ago.
Evidently, the “vibecession”—a shorthand term for the disjunction between positive economic statistics and negative economic sentiment—remains in place. But it hasn’t prevented Kamala Harris, Biden’s replacement as the Democratic candidate, from vaulting past Donald Trump in national and battleground-state polls: according to 538’s national polling average, the Vice-President ended last week 2.6 percentage points ahead of Trump. And it isn’t just the head-to-head numbers that leap off the page. In the details of recent polls, there have been some intriguing findings on how voters are thinking about Harris and the economy.
Back in May, a survey of battleground states conducted by the New York Times, the Philadelphia Inquirer, and Siena College showed Trump leading Biden by a whopping twenty-two points on who voters trust to do a better job with the economy. In a new Times/Siena survey, published about a week ago, Trump’s lead over Harris on the same question was nine points. Other polls have indicated Harris narrowing the gap further, or even eliminating it. The Cook Report recently released a poll of battleground states that showed the Vice-President was within six points of Trump on the economic-trust issue. And a Financial Times/University of Michigan survey had her leading him by a point. “It’s remarkable that Harris escapes a significant amount (though certainly not all) of the economic pessimism surrounding the current Administration, given that she’s part of it,” Lindsay Vermeyen, a partner at Benenson Strategy Group, one of the pollsters that carried out the Cook Report survey, said.
What explains these developments, and how likely are they to last until November? To some extent, they may simply reflect the fact that many Democrats and Democratic-leaning independents have greeted Harris’s candidacy enthusiastically. “It’s not something specific to the economy,” John Sides, a political scientist at Vanderbilt University who co-authored books on the 2016 and 2020 elections, told me. “We are in a moment when the balance of information about the election is going in Harris’s favor. She’s had a positive series of news cycles. Her ratings are going up on a broad range of issues.”
As the campaign continues, that could change. But there are several factors that may help Harris blunt Trump’s attacks on the economy between now and November, beginning with the fact that she hasn’t been occupying the Oval Office for the past three and a half years. Voters have been so angry about high prices and the cost of living that they have refused to give Biden credit for more positive economic developments, which include strong job growth, surging manufacturing investment, and narrowing wage inequality. Even though Harris has been serving as Biden’s deputy, the Vice-Presidency is a much less visible and consequential post, which carries considerably less baggage and isn’t closely associated with economic policy. (There is a reason that “Bidenomics” is a thing, and “Harrisnomics” isn’t.)
Another factor working in Harris’s favor is the passage of time. In an article published late last year, Ryan Cummings and Neale Mahoney, two economists at Stanford, found that the negative impact of a price shock on consumer sentiment normally fades by about seventy-five per cent within two years. Since June of 2022, when the inflation rate peaked, consumer sentiment has rebounded more slowly than that. Last week, the University of Michigan announced that its closely watched index of consumer confidence rose slightly, but it’s still below the level it was at a year ago.
When I spoke with Mahoney last week, he said that he didn’t have a full explanation for why consumer sentiment has remained so downbeat, but he brought up two factors that could have contributed: a negative media bias and communications failures on the part of the White House. “There is good evidence that bad news generates more clicks than good news,” he said. “So, for example, most of the media only covers gas prices when they are high.” He went on, “Or maybe this has to do with the messenger. Maybe the President hasn’t been able to articulate the ‘Morning in America’ message very effectively.”
Whatever is most responsible for the length of the vibecession, there are some signals that the economic environment may be turning in Harris’s favor. With inflation getting back to normal, the Federal Reserve has the freedom to cut interest rates. A rate reduction, which the Fed is expected to announce on September 18th, at the conclusion of its next policy meeting, could well lead to lower rates on mortgages, car loans, and other forms of consumer credit. Obviously, the Harris campaign can’t erase the legacy of two years of high prices and interest rates. But a background of low inflation and falling borrowing costs wouldn’t hurt her campaign during the run-up to the election.
If the recent polling is accurate, voters may also be more inclined to give the Vice-President a fair hearing on the economy than they were with Biden. In advance of her upcoming acceptance speech at the D.N.C., on Thursday, Harris has settled on a campaign message that directly addresses the high cost of living. Speaking in North Carolina last week, she called for a federal ban on price gouging in the food and grocery industries. Although some economists have registered concerns that this type of interventionism could be counterproductive, polls suggest it’s popular with non-economists. “I think it’s politically smart,” Sides said. “She’s signalling two things to voters: I care about your concerns, and I have policies that you like.”
Trump, meanwhile, is demonstrating a startling inability to exploit his opponent’s vulnerabilities. Last week, he, too, gave a speech in North Carolina that was billed as an address on the economy. But the Washington Post’s Philip Bump noted that Trump only devoted about a sixth of his almost twelve thousand words to the subject. And, rather than focussing on the record of the Biden-Harris Administration, he talked about imposing tariffs as high as twenty per cent on imports to the United States—a levy twice the size that he has called for previously, and one that would burden American families with thousands of dollars in additional costs. (According to a study from the Peterson Institute for International Economics, which I wrote about last month, a general tariff of ten per cent, when coupled with Trump’s proposal to tax imports from China at sixty per cent, would cost middle-income households about seventeen hundred dollars a year.)
After Trump’s speech, his campaign tried to downplay the twenty-per-cent figure, noting that he hadn’t said it would apply to imports from all foreign countries. However, the campaign didn’t specify which goods it would apply to, and it couldn’t obscure the larger and more damaging truth: a Presidential candidate who has been presented with the opportunity to indict his opponent for being part of an Administration that presided over a big rise in prices is now running on a solemn pledge to raise prices further. If anything can help Harris neutralize bad economic vibes all the way to November, it could well be Trump himself. ♦
